DUNMORE - Borough council unanimously approved a $5 million loan Monday to support the borough's retirement pensions, which the state had labeled as "moderately distressed."
Council members addressed the municipal pensions, which had been underfunded for years, generating late fees and other additional charges. By adding to the borough's municipal pension asset fund, which was $7.3 million in 2011, it comes close to matching the nearly $13 million in pension liabilities.
The $5 million loan for a 15-year term at a 3.59-percent interest rate will not add additional debt, said Councilman Michael McHale. The debt will be paid with savings from earlier this year, when the borough refinanced about $11 million in debt at significantly lower interest rates, from 7 to 9.5 percent to 3.5 percent.
This will save the borough $300,000 to $400,000 annually, said Mr. McHale, a certified public accountant.
Council has taken a fiscally conservative approach to funding borough expenses in recent years. Council members have said it was necessary after years of undisciplined spending by previous administrations. As recently as three years ago, council borrowed money to make payroll.
Two weeks ago, council approved a tentative 2013 budget of $10.4 million with no tax increase or cuts in services, the second year without a tax increase.
"We've been working to rectify the situation for years," Mr. McHale said of the borough's financial challenges.
While still carrying a significant amount of debt, borough council members say whittling away expenses when possible and earning lower interest rates resulted from holding the borough accountable for its annual budgets.
Councilman Vito Ruggiero, a nursing home administrator who has worked with Mr. McHale on borough budget issues, said banking institutions have noticed the improved fiscal management. Mr. Ruggiero said the borough has gained negotiating leverage with bankers, leading to lower interest rates.
"Bankers met with us on a Sunday," Mr. Ruggiero said. "The borough has reached a point where lending institutions seek us out."
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